This paper analyses the effects of money shocks on macroeconomic aggregates in a flexible-price, incomplete-markets environment that generates persistent wealth inequalities amongst agents. In this framework, unexpected money shocks redistribute wealth from the cash-rich employed to the...

The distribution of money across households is much more similar to the distribution of financial assets than to that of consumption levels, even controlling for life-cycle effects. This is a puzzle for theories which directly link money demand to consumption, such as cash-in-advance (CIA),...

We construct a general equilibrium model with incomplete markets and borrowing constraints, in order to study the term structure of real interest rates. Agents are subject to both aggregate and idiosyncratic income shocks, which latter may force them into early portfolio liquidation whilst in...

This article identifies a new channel through which inflation affects the real economy. In a simple monetary model where agents face heterogenous income flows, it is proven that credit constraints create heterogeneity in money demand. Because of this heterogeneity, long run inflation affects the...

Financial crises are often associated with an endogenous credit reversal followed by a fall in asset prices and serious disruptions in the financial sector. To account for this sequence of events, this paper constructs a model where the excessive risk-taking of portfolio investors leads to a...

We study the macroeconomic implications of time-varying precautionary saving within a general equilibrium model with borrowing constraint and both aggregate shocks and uninsurable idiosyncratic unemployement risk. Our framework generates limited cross-sectional household heterogeneity as an...

We analyse the term structure of interest rates in a general equilibrium model with incomplete markets, borrowing constraint, and positive net supply of government bonds. Uninsured idiosyncratic shocks generate bond trades, while aggregate shocks cause uctuations in the trading price of bonds....

This paper analyzes the long-run effect of monetary policy when credit constraints are taken into account. This analysis is carried on in a heterogeneous agents framework in which infinitely lived agents can partially self-insure against income risks by using both financial assets and real...

This paper analyses the effect of transitory increases in government spending when public debt is used as liquidity by the private sector. Aggregate shocks are introduced into an incomplete-market economy where heterogenous, infinitely-lived households face occasionally binding borrowing...

We analyse the risk-taking behaviour of heterogenous intermediaries that are protected by limited liability and choose both their amount of leverage and the risk exposure of their portfolio. Due the opacity of the financial sector, outside providers of funds cannot distinguishing "prudent"...